Capmark Financial May File for Bankruptcy

Michael J. de la Merced |The New York Times

Sunday, 25 Oct 2009 | 9:24 AM ETThe New York Times

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The Capmark Financial Group, the big commercial real estate finance company cobbled together from pieces of GMAC, may file for bankruptcy as soon as this weekend, a person briefed on the matter told DealBook on Saturday.

If that happens, the move would be unsurprising: Capmark warned last month that it might seek Chapter 11 protection after it reported a $1.62 billion quarterly loss.

Last month, the company agreed to sell its mortgage loan and servicing business to Warren E. Buffett’s Berkshire Hathaway and Leucadia National for as much as $490 million. That agreement carried a 60-day expiration date, or around Nov. 2 — unless Capmark filed for bankruptcy, which would give it another 60 days to complete the sale.

The company is only the latest to fall victim to continued trouble in the commercial real estate market, which many analysts have said will continue to deteriorate. Many small banks have collapsed this year under the weight of commercial loans.

Kohlberg Kravis Roberts, Goldman Sachs Capital Partners, Five Mile Capital and Dune Capital bought GMAC’s commercial real estate businesses in 2006 for about $1.5 billion, with GMAC retaining a 25 percent stake in the operation. K.K.R. has already written down the value of its Capmark investment to zero.

Capmark has about $10 billion in assets, with another $10 billion in a Utah bank the company owns that would not be subject to a bankruptcy filing. Capmark has already moved several hundred million dollars into the bank to shore up its financial health.

In a Chapter 11 proceeding, the Berkshire-Leucadia sale would be structured as a 363 sale, a transaction named after a section of the federal bankruptcy code. A Berkshire-Leucadia joint venture would be deemed the stalking horse bidder, though others could come in and potentially top that offer.